Holmes Institute HI5020: In-depth Analysis of Cash Flow Statements

This case study provides an analysis of corporate accounting principles, focusing on the preparation and interpretation of financial statements, particularly income statements and cash flow statements. It highlights the importance of these statements for investors in assessing a company's financial performance and liquidity. The analysis includes a detailed examination of cash flow statements from multiple companies, identifying key trends in operating, investing, and financing activities. The report also addresses the relationship between net income and cash flow from operations, capital expenditures, dividend policies, and working capital management. The case study concludes with a critical evaluation of the financial strengths and weaknesses of the companies based on their cash flow statements.

Running head: Corporate Accounting
Corporate Accounting
Name of the Student
Name of the University
Author Note

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Corporate Accounting
Executive Summary
The report shows about the various concept of the corporate accounting as it help
the company to make their financial statement and present the same in front of the
financial users of the company. It also show about the various aspects of the income
statement of the company and cash flow of the company as how it is very useful to
the investors in regards of the financial statement of the company. It show about the
case study in which the company cash flow is been given and show various aspects
of the cash flow of the company and also how it help the investor to check the
financial performance of the company.

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Corporate Accounting
Table of Contents
Introduction...................................................................................................................4
Part A............................................................................................................................4
Income Statement.....................................................................................................4
Statement of Cash flow.............................................................................................5
Part B............................................................................................................................6
ANSWER 1...............................................................................................................6
ANSWER 2...............................................................................................................9
ANSWER 3.............................................................................................................11
Conclusion..................................................................................................................11
Reference...................................................................................................................13

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Corporate Accounting
Introduction
Corporate Accounting is the process which helps the company to prepare
their financial account and help them to prepare a proper financial statement of the
company. As this take into the consideration of the company as it checks all the rules
and regulation that the company have to follow while preparing the financial
statement of the company (Kaplan and Atkinson 2015). It provide all the guidelines
which the company have to follow in regards of the preparation of the financial
statement of the company. It helps the company to do the proper amount of
disclosure in regards of the financial statement of the company. The report is been
based upon how the income and balance sheet of the company help the user to take
the decision in regards of the financial statement of the company (Kieso, Weygandt
and Warfield 2016). It also show different part of the cash flow in regards of the
information which is been given in the case study and this report will help the users
to get an overview of the cash flow and how it should be analysed by the company
(Libby 2017).
Part A
The company issued its financial statement and in which it contains income
statement and statement of the cash flow which helps the users to take decision in
regards of the company financial performance. The income statement and the
statement of cash flow have been described below:
Income Statement
The income statement shows about the revenue and expenses of the
company as it show all the business activities which the company carry and also
show the cost of the expense which is been associated with business activities of the
company (Smith 2017). It even able to show all the non-cash items which are there
in the financial statement of the company such as depreciation upon the asset. This
even help the users to know about how much profit the company is able to earn in
the current year and also what are the profit is going to give to the shareholders of
the company.
Statement of Cash flow
It is the statement which contain the details of the inflow and outflow of the
cash which is been done by the company in the business. It show all the transaction
which the company does and also show how the inflow and out flow of the cash has
been occurred in the company (Schaltegger and Burritt 2017). It help the users to
know the performance of the company as it able to judge the liquidity position of the
company from the help of the statement of cash flow. The cash flow statement is
been divided into three heads as operating, investing and financing.
Investors Point on view upon Income statement and Statement of cash flow
Income statement - It is been consider as one of the important document for the
investors point of view as it help the investors to know about how the revenue the
company is earning and also what are the expenses which are been associated in
the business of the company so it able to know how the company is performing in
the market (Bebbington, Unerman and O’DWYER 2014). It will contain all the details
of the company activities and also the investors is able to know about the profit of the
company so if there is an increase or decrease in the profit of the firm can be easily
able to be judged by the investors so it will help them to know about the performance

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of the company and it can able to get details and can able to take financial decision
in regards of the company (Brown 2014).
Statement of Cash Flow – It is been seen that the company cash flow statement
shows about the cash inflow and out flow in the company so this help the investors
to know from where the company is able to get cash and were they are investing it
(Hribar, Kravet and Wilson 2014). As it can able to know the main source of the cash
inflow and outflow of cash so it can able to judge the risk which is been associated
with the cash as if there is more inflow from investing activities so it can be said that
the company is able sale some of its investment (Minnis and Sutherland 2017). This
statement also helps the investor to know the liquidity position of the company as it
can able to judge the position as if the company liquidity position is good than it will
help the investors to gain confidence on the financial statement of the company and
able to invest in the company.
Part B
ANSWER 1
1A
The major source of the cash flow for each firm is that as per the cash flow
statement of fantastic Limited is from the receipt of the customers as it has most
amounts of the cash from this source in the company (Kraft 2014). As per the Bhp
limited is been concern it get much amount to the inflow of cash from the Exploration
expenditure so it can be said that the company is able to get much amount of cash
flow from this activity (Traina 2018). The company santos limited is able to get the
cash from the receipts of the customers as it can be seen that the company is having
much amount of the cash from this activity only as it can be seen from cash flow
statement of the company.
1B
The trend of the cash flow of operating activities from each company is given
below:
The above table show about the trend of the company which they have earn from the
cash flow from operating activities and this trend can help the financial user to take
the decision in regards of the company financial statement.
1C
As per the case study which is been in regards of the BHP Limited show
about the statement of the cash flow as it can be seen that the company is net
income less than then the cash from operations as it can be seen that the net
income is 14751 and cash generated from operation is 22949 so there is a big
difference in the two and this may also occur in the company as the net profit does
not take into consideration the non-financial items which are been there in the cash
from operation as it deduct the depreciation part from the profit of the company so it

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can be said that these is the main reason for the company to have a difference in
the net income and cash from operation of the company (Nobes 2014).
1D
As per the cash flow statement is been seen of the company it can be said
that the company is able to have the cash from operation and able to fulfil all the
capital expenditure of the company as it have earn more amount of the money in the
company business so that it can able to pay the amount easily in regards of the
financial statement of the company (Cao, Chychyla and Stewart 2015). As it is been
earning 22949 in cash from operation and it total expenditure cost which can be get
in the investing activities of the company so it can be said that the company is able
to secure a good position in the market and able to pay its debt in the market in
regards of the capital expenditure.
IE
The company cash flow show that the company is able to earn enough
amount of cash from operation so that it can able to include both the capital
expenditure and the dividend amount which is to paid by the company (Kwok 2017).
It can also be said that it is the company activities which help the company to get the
amount of cash from operations so that it can able to pay both the capital
expenditure and dividend which is been paid by the company.
1F
If the company is able to have more amount of the operation so than it should
invest the same in the company financial business so that it will able to expend the
same from the business and also it will able to increase the overall profit of the
company. If the company does not have proper amount of money in the operation of
the cash so than it should pay the capital expenditure from the cash flow of other
activities of the company as it will able to pay the amount form other activities also so
that it can able to pay the amount in regards of the capital expenditure.
1G
The company statement of cash flow show that there is using many other
asset as it can be seen from the company statement as there are it can be seen
trade and other payables have some inflow in the company so it can be said that the
company is able to generate the cash flow from the asset as it will be very helpful for
the company that they able to get the return from the asset and as a result it able to
show some amount of cash inflow in the company.
1H
The major items which had affected the cash flows of the company BHP
Limited is that as per the statement of the cash flow it can be seen that the major
outflow of the company is payment of the royalty related taxation, interest paid and
purchase of property and plant and equipment so it can clearly seen that this are the
section from which the major cash flow of the company have occurred. So these
items have affected the total cash inflow of the company and as a result there is
overall decrease in the cash flow of the company.
1I

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The trend of the capital expenditure is been shown below
1J
The trend of the dividend received is been shown below:
1K
The trend is been shown of the net borrowings of the company
1L
The trend in the working capital of the company
ANSWER 2
As per the case study which have listed the statement of cash flow of the
three companies and critically evaluation of the financial strength is been shown
below:
Funtastic Limited
The cash flow statement of the company shows that there is a decrease in
the receipt of the customers in the current year so this signify that the company is not
able to generate much amount of cash from the sale of the product and it can
happen that are not able to get the proper amount of the customer in the market so
that it also affect the overall earning of the company (Feijóo, Gómez-Barroso and
Voigt 2014). It can be said that there is a big increase in the out flow of the cash in
current year compare to the previous year so this is a big problem as it signify that
the expenses is been increase in the company in compare to the revenue of the
company. So if the whole cash flow statement is been summarized so it can be said
that the company is not able to get any inflow as total as the total cash which is been
generated in the year is 67 so this show that the company is not having much
liquidity in the company so it show that there is a weak position of the company in
regards of the cash structure of the company (Srivastava 2014).

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BHP Limited
As per the cash flow statement of the company it can be seen that the
company is having an increase in the overall profit in the company so it shows that
the company is able to get the required amount of business from the market and also
it show that there is a bit of cost reduction which is been done by the company so
that it can able to increase the profit of the company (Henderson et al., 2015). The
cash generated from the operation have also increase in the current year so this
show that the company is able to obtain a good flow of business as a result it able to
increase the overall cash from the operation and it show that the company is having
good position in the market. So it can say that the company is having a good liquidity
position as there are able to generate the overall cash so it show the good position of
the company.
Santos Limited
As per the cash flow statement of the company it can be seen that there is
increase in the company customer so it show that the company is having a god
business in the market and also help the m to show the good financial position of the
company. The overall operating profit has also increase in the company as it have
increase in the receipt so as a result it have increase the overall profit of the
company (Palazuelos Cobo, Herrero Crespo and Montoya del Corte 2017). There is
an increase in the outflow of the investing activities so this show that the company is
increasing its investment as it is spending upon the investment in different section of
the market. As lastly it can be seen that the cash is also been increased in the
current year so this show the liquidity position of the company is also good as after
paying all the expenses and other cost it able to have such a good amount of cash at
the end of the year so this is been consider as good financial position of the
company (Cascino et al., 2014).
ANSWER 3
As for the lending purpose the company which will be selected is BHP Limited
as it is the one who had the best liquidity position in compare of other company and
also it able to have an increase in the profit for the year so this show that the
company is having a good position in the market so if the money is been lend to the
company than it will able to get the return more easily and also the company is
having good position so it will return the money more easily to the investors and
there will no bad debts in regard of the money which is been lend to the company
(Loughran and McDonald 2014).
Conclusion
The report is been concluded about the corporate accounting as it show how
the company is been help by the corporate accounting process for the preparation
and presentation of the financial statement of the company. It provide all the
information which is been required by the company in order to prepare the financial
statement of the company. It show all the necessary standard which the company
should follow while making the financial statement of the company.
It also conclude about the use of income statement and the cash flow of the
company as how it help the investors to know the overall position of the company.
Income statement show the revenue and expenses so that it can able to know
overall profit which the company have earn by carrying the business in the firm. It

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also do the analysis of the given case study in which the cash flow statement of the
company is given and have answered all the question which are been based upon
case study of the company. Lastly it show about the financial performance of the
company and which company should be select in order for the lending purpose as it
is been selected in regards of the liquidity position of the company.

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Srivastava, A., 2014. Selling-price estimates in revenue recognition and the
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